News / Economy

Egypt to Pay $1.5B in Arrears to Foreign Oil Firms

People shop at Al-Ataba, a popular market in downtown Cairo, Nov. 11, 2013.
People shop at Al-Ataba, a popular market in downtown Cairo, Nov. 11, 2013.
Reuters
Egypt promised on Wednesday to pay $1.5 billion of the $6 billion it says it owes oil firms, hoping the announcement will revive confidence in an economy battered by nearly three years of political upheaval.
 
Egyptian officials speaking at an investment conference also sought to ease mounting concerns over everything from legal uncertainty to the black market for foreign currency.
 
“There is approval to pay $1.5 billion,” Prime Minister Hazem el-Beblawi told the gathering, designed to lure investment from Gulf Arab states and businessmen. He said the arrears had discouraged investment in the critical energy sector.
 
The oil-producing countries rallied behind Egypt after the army ousted President Mohamed Morsi of the Muslim Brotherhood in July, pledging billions of dollar in financial support.
 
Political uncertainty since a popular uprising ousted autocrat Hosni Mubarak in 2011 has frightened away tourists and investors, cutting tax revenues and foreign currency inflows.
 
That has increased pressure on the government to get oil firms investing again in extraction and exploration and attract both Arab and Western investors.
 
Egypt has repeatedly promised to repay arrears to the oil companies following Morsi's removal, which was welcomed by Gulf states fiercely opposed to the Muslim Brotherhood.
 
Finance Minister Ahmed Galal, addressing the same conference, said the central bank would supply the dollars needed to pay the firms.
 
Financial disclosures by firms including BP, BG Group, Edison SpA and TransGlobe Energy show Egypt owed them more than $5.2 billion at the end of 2012.
 
In the week after the army takeover, Saudi Arabia, Kuwait, and the United Arab Emirates pledged a combined $12 billion in grants, interest-free loans and oil products.
 
Now Egypt is hoping Gulf businessmen at the Cairo conference will also pump cash into the country, a U.S. ally which has a peace treaty with Israel and controls the Suez Canal.
 
Investment Minister Osama Saleh told Reuters Egypt hoped to attract $4 billion-$5 billion in direct foreign investment in the year to the end of June 2014.
 
Egyptian government officials speaking at the conference said the country was on track to implementing a political roadmap that will lead to free elections and bring stability.
 
But authorities have not managed to bring calm to the streets, where Morsi supporters stage regular protests against what they call a military coup that has brought widespread human rights abuses.
 
The government says the Brotherhood is a terrorist group and a threat to national security.
 
Political support from Gulf states has helped Egypt withstand criticism from Western allies who have questioned the country's democratic credentials since the army takeover.
 
“How many fish?”
 
Central Bank Governor Hisham Ramez said he expected more Gulf aid, but had no figure in mind. “Actually, we're not only counting on aid. We're counting on investments to come in.”
 
Asked if he anticipated more aid from Saudi Arabia, the biggest Gulf economy, finance minister Galal told Reuters: “I cannot tell beforehand. You go fishing, how many fish are you going to catch?”
 
Egypt badly needs private capital. Foreign direct investment fell to $3 billion in the 2012/13 financial year, which ended in June, compared with more than $10 billion a few years ago.
 
The United Arab Emirates appears especially enthusiastic for its companies to launch or resume projects in Egypt.
 
An informed source close to major Abu Dhabi investment companies told Reuters nearly $5 billion had been committed in loans and investments over the last four months and there was still scope for further investment in Egypt.
 
Kirill Dmitriev, CEO of the Russian Direct Investment Fund, a $10 billion Kremlin initiative, said he was encouraged by the UAE's presence at the conference.
 
“We believe Egypt is becoming an attractive investment destination,” he told Reuters.
 
UAE Minister of State Sultan Al Jaber said sectors under discussion include agriculture, oil, gas and renewable energy.
 
“We can't today define the size of investments. This we consider the beginning of a new page,” he said.
 
“The most important thing we'd like to see happen is the topic of the laws needed to assure investors and protect their capital ...”
 
The government is preparing a law to reinforce the legal standing of past contracts with the state, Mohamed Abazeid, an adviser to Egypt's investment minister, told the conference.
 
The business environment in Egypt has been clouded by court cases that have challenged past contracts concluded by the state. These have included rulings ordering the renationalising of public sector businesses sold off in the Mubarak era.
 
Qatar, which supported the Muslim Brotherhood, has been reluctant to invest in Egypt since Morsi's overthrow.
 
Although Gulf Arab support is vital, Egypt is under pressure to come up with a long-term plan to revive the economy.
 
The army-installed government launched a 29.6 billion Egyptian pound ($4.3 billion) stimulus package this year after Gulf countries pledged aid.
 
The economy grew a meager 2.2 percent in the year to June 30, far too slow to make an impact on youth unemployment estimated at over 20 percent. Beblawi said the government aimed for economic growth of 3.5 percent in the current fiscal year.
 
In a boost to the government officials trying to sell Egypt to Gulf Arab investors, Egyptian tycoon Naguib Sawiris, whose family controls the Orascom corporate empire, said he would invest $1 billion in the country in the first quarter of 2014.
 
He told Reuters the investment would focus on construction, real estate, agriculture and microfinance.
 
But it will take more than one heavy hitter to fix Egypt's finances.
 
The Egyptian pound is being propped up by central bank dollar sales, introduced a year ago to help counter a run on the currency as the plunge in foreign investment and tourism caused a sharp fall in foreign reserves.
 
Reserves, which stood at $36 billion before Mubarak fell, have been under pressure ever since. They totalled $18.59 billion at the end of October and Ramez told the conference they had dipped slightly last month. The November figure is due soon.
 
Ramez said the black market for the Egyptian pound  would “not last long”, as two market sources said the currency had weakened against the dollar because of importer demand.

You May Like

US Investors Eye IPO for China's Alibaba

E-commerce giant handled 80 percent of China's online business last year, logging more Internet transactions than US-based Amazon.com and eBay combined More

Video Uneasy Calm Settles Over Israel, Gaza Strip

As cease-fire begins, Palestinians celebrate in streets; Israelis remain wary More

Video Chinese Doctors Use 3-D Spinal Implant

In treatment of a 12-year-old boy Chinese doctors used a 3-D printer and special software to create an exact replica of vertebra More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Chinese Doctors Use 3-D Spinal Implanti
X
August 27, 2014 4:53 PM
A Chinese boy suffering from a debilitating bone disease has become the first patient with a part of his spine created in a three-dimensional printer. Doctors say he will soon regain normal mobility. VOA’s George Putic reports.
Video

Video Chinese Doctors Use 3-D Spinal Implant

A Chinese boy suffering from a debilitating bone disease has become the first patient with a part of his spine created in a three-dimensional printer. Doctors say he will soon regain normal mobility. VOA’s George Putic reports.
Video

Video Uneasy Calm Settles Over Israel, Gaza Strip

Israel and the Gaza Strip have been calm since a cease-fire set in Tuesday evening, ending seven weeks of hostilities. Hamas, which controls Gaza, declared victory. Israelis were more wart. VOA’s Scott Bobb reports from Jerusalem.
Video

Video India’s Leprosy Battle Stymied by Continuing Stigma

Medical advancements in the treatment of leprosy have greatly diminished its impact around the world, largely eliminating the disease from most countries. India made great strides in combating leprosy, but still accounts for a majority of the world’s new cases each year, and the number of newly infected Indians is rising - more than 130,000 recorded last year. Doctors there say the problem has more to do with society than science. VOA News reports from Kolkata.
Video

Video Northern California Quake: No Way to Know When Next One Will Hit

A magnitude 6.0 earthquake rocked northern California’s Napa Valley on Sunday. Roads twisted and water mains burst. It was the wine country’s most severe quake in 15 years, and while hospitals treated many people, no one was killed. Arash Arabasadi has more from Washington on what the future may hold for those residents living on a fault line.
Video

Video Scientists Unlock Mystery of Bird Flocks

How can flocks of birds, schools of fish or herds of antelope suddenly change direction -- all the individuals adjusting their movement in concert, at seemingly the same time? British researchers now have some insights into this behavior, which has puzzled scientists for a long time. VOA's George Putic has more.
Video

Video Ukraine: Captured Troops Proof of Russian Role in Separatist Fight

Ukrainian officials say they have captured Russian soldiers on Ukrainian territory -- the latest accusation of Moscow's involvement in the conflict in eastern Ukraine. VOA's Gabe Joselow reports from the Ukrainian side of the battle, where soldiers are convinced of Russia's role.
Video

Video Rubber May Soon Come From Dandelions

Synthetic rubber has been around for more than a century, but quality tires for cars, trucks and aircraft still need up to 40 percent or more natural rubber content. As the source of natural rubber, the rubber tree, is prone to disease and can be affected by bad weather. So scientists are looking for replacements. And as VOA’s George Putic reports, they may have found one in a ubiquitous weed.
Video

Video Jewish Life in Argentina Reflected in Yiddish Tango

Jewish people from across Europe and Russia have been immigrating to Argentina for hundreds of years. They brought with them dance music that were eventually mixed with Argentine tango. The result is Yiddish tango -- a fusion of melodies and cultural experiences that is still evolving today. Elizabeth Lee reports from the Skirball Cultural Center in Los Angeles, where one band is bringing Yiddish tango to an American audience.

AppleAndroid

World Currencies

EUR
USD
0.7537
JPY
USD
103.79
GBP
USD
0.6032
CAD
USD
1.0957
INR
USD
60.522

Rates may not be current.